Brexit is irrelevant to German merger, claims LSE chief

The LSE has agreed a takeover plan with Deutsche Börse despite rival interest from US operator Intercontinental Exchange

The London Stock Exchange has shot down suggestions that it was rushing into the arms of a German suitor to dodge the impact of Britain’s possible exit from the European Union as it backed the “industry-defining” £20bn tie-up.

Its chief executive, Xavier Rolet, said a Leave vote would not dent the group’s close ties with traders and investors around the world. This is despite concerns that London’s stock markets would be hurt by a Brexit. 

“LSE is a global company and we have global infrastructure. We do not have any geographic policies – we position ourselves for clients [worldwide] in a way we can service them,” he said. “I’m happy with London’s global reach. The group has global aspirations.”

Last month, Mr Rolet was a signatory to a letter signed by nearly 200 business executives supporting Britain’s continued membership of the EU. He repeatedly refused to answer questions about a number of suitors circling the LSE, saying that takeover rules prevented him from speaking about the subject. 

The LSE has agreed a takeover plan with Deutsche Börse despite rival interest from US operator Intercontinental Exchange (ICE), the owner of the New York Stock Exchange. Bankers for Deutsche and ICE are jockeying for position to try to engineer a takeover of the London exchange, although the American group is yet to bid. 

If ICE moves, it could force a partial break-up of LSE, with plans by the Americans to spin off its Italian stock exchange and hive off the French arm of LCH.Clearnet. Rival US operator CME is also understood to be exploring an offer. 

“We believe the potential merger [with Deutsche] can deliver an industry-defining combination,” Mr Rolet said. 

Analysts expressed concerns about the weak underlying growth of the business and what would happen to LSE if the deal fell through.

“Back when Rolet took over it was an equity exchange, and now it’s a global leader. But where there has been growth it’s come from consolidation,” said Jonathan Goslin, an analyst at Numis. “It is trading at high levels at the moment, and if this deal doesn’t go through, it is looking at being left an exchange business again.”

The LSE’s full-year results were flattered by the inclusion of fees generated by its Russell Investments business, which it is still hoping to spin off this year. Including acquisitions made last year, revenues rose 78 per cent to £2.3bn. Stripping them out, the growth was more sluggish, up 2 per cent. Including takeovers, adjusted pre-tax profits rose by 31 per cent to £643.4m.

Comments